Who is ripping off whom?

Ivo Vegter

Ivo Vegter

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

20 Apr 2010 (South Africa)

South Africans are being admonished not to gouge tourists. But we're not the real FIFA World Cup profiteers.

South Africans working in the tourism industry have been warned not to engage in "price gouging" during the 2010® FIFA® World Cup® South Africa®.

Remember Athens, they are told. During the 2004 Olympic Games, the Greek capital gained a reputation as a rip-off destination among international tourists. By contrast, Barcelona kept its prices down and has enjoyed a massive tourism boom since its own day in the sun in 1992.

Our tourism fraternity is protesting, and rightly so. It is galling that the South African hospitality industry stands accused, when it is not the real culprit.

The biggest offender of them all is Match Services, the organisation that was granted monopoly rights by FIFA to sell tickets and tour packages to foreign visitors. Match is part-owned by a company run by Phillipe Blatter, the nephew of FIFA president Sepp Blatter. It has been cavalier in its treatment of South African businesses and rapacious in its sales to foreign tourists.

The Kruger National Park recently dumped some 25 000 rooms on the market, after Match, for whom they had been reserved, failed to sell them. It paid no penalties for relinquishing the reservations, so the park now has only a few weeks left to try to sell the empty beds.

The same happened with more than two thirds of the nearly two million rooms Match originally reserved. Many of the hotels, lodges and B&Bs that agreed to Match's harsh terms, because it seemed to be the only chance of participating in the promised World Cup bonanza, are now stuck with tons of unsold inventory and little time to sell it.

Meanwhile, tour operators are expected to pay a whopping $30 000 licence fee to Match for every country in which they wish to sell packages. For a foreign operator serving only its own country, that's bad enough. But for a South African tour operator with clients all over the world, the initial outlay to Match could be crippling. If your company gets two groups each from five countries, that's over a million rand you have to recoup from ten paying customers, just to take care of the Match mafia.

Clearly, only the really big operators can afford such an extortionate shake-down, so smaller businesses are left out in the cold. So much for developing the tourism industry in South Africa.

As if this isn't enough, Match charges massive markups, including 35% on World Cup tickets themselves. Rooms were sold to Match at the kind of knock-down prices only a monopolist can demand: it insisted on paying 2007 rates. Reports vary, but talk in tourism circles suggests that international guests pay anywhere between 50% and 500% more than regular high season rack rates for rooms resold by Match.

Once all these extortionate licence fees and exorbitant markups are recouped from hapless tourists, will they be told how much of their cost is attributable to profiteering by the FIFA cartel? Of course not. They'll merely return home, grumbling that they went to South Africa and got ripped off.

The reality, however, is different. The minister of tourism, Marthinus van Schalkwyk, commissioned auditing firm Grant Thornton to do a price survey, in the hope of getting to the truth behind price-gouging allegations. Turns out is that although some hotels and lodges did charge a modest premium on peak rates, as might be expected in times of high demand, most prices were found to be reasonable.

Who will tell these tourists that they were ripped off not by South Africans, but by FIFA and its nepotistic supplier cartel? Who will tell them that most of our tourism sector – especially the small, emerging companies that are the locus for future growth – failed to benefit at all from the World Cup, thanks to Match's extortionate licence fees? Who will explain the shambles that resulted when thousands upon thousands of unsold rooms reserved by Match were summarily dumped back onto our parks, lodges and hotels?

Our government's mandate is not to sign South Africa's rights away in return for shallow self-aggrandizement. Instead of investigating price-gouging on the part of South Africans, its duty is to defend us against cavalier extortion by rapacious foreign invaders.

It's time we take back the Order of Good Hope which South Africa awarded to Sepp Blatter. There's precious little hope left for the victims of FIFA's crass exploitation.

By all means, support our football team in June and July. Welcome foreign visitors, and show off our beautiful country.

But boycott FIFA. Buy your shirts, footballs, marketing material and beer from companies that didn't sign a nefarious pact with the avaricious football king. If it sports an official logo or FIFA trademark, shun it. Keep your money, and our country's economic future, out of the dirty paws of the Blatter royal family and their venal cohorts. They've done enough damage as it is.

UPDATE: The mention of the "2007 rate" on which Match insisted needs to be qualified: according to a local tour operator, it agreed on 2007 peak season rates, plus inflation of about 7% pa, less 30% commission. This means suppliers certainly did not get paid any more than normal, and if selling prices were inflated, this was done by Match.

Ivo Vegter

Ivo Vegter

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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